Question 1

Corrective taxes are more efficient than regulations for keeping the environment clean.

Accepted Answer

A) True 
 B)False

Question 2

Some policies toward externalities provide incentives so that private decision makers will choose to solve the problem on their own.What name do we use for these types of policies?

Accepted Answer

We call th...

Question 3

According to the Coase theorem,whatever the initial distribution of rights,the interested parties can bargain to an efficient outcome.

Accepted Answer

A) True 
 B)False

Question 4

Suppose that an MBA degree creates no externality because the benefits of an MBA are internalized by the student in the form of higher wages.If there are no government subsidies for MBAs,then which of the following statements is correct?

Accepted Answer

A)   The equilibrium quantity of MBAs will equal the socially optimal quantity of MBAs.
B)   The equilibrium quantity of MBAs will be greater than the socially optimal quantity of MBAs.
C)   The equilibrium quantity of MBAs will be less than the socially optimal quantity of MBAs.
D)   There is not enough information to answer the question.E) None of the above
F) A) and C)

Question 5

Emission controls on automobiles are an example of a

Accepted Answer

A)   corrective tax.
B)   command-and-control policy to increase social efficiency.
C)   policy that reduces pollution by allocating resources through market mechanisms.
D)   policy to reduce congestion on urban freeways.E) B) and C)
F) None of the above

Question 6

In some cases,tradable pollution permits may be better than a corrective tax because

Accepted Answer

A)   pollution permits allow for a market solution while a corrective tax does not.
B)   pollution permits generate more revenue for the government than a corrective tax.
C)   pollution permits are never preferred over a corrective tax.
D)   the government can set a maximum level of pollution using permits.E) A) and D)
F) A) and C)

Question 7

Figure 10-9   
-Refer to Figure 10-9,Panel (b) and Panel (c) .The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack.Therefore,the socially optimal quantity of smokestack scrubbers is represented by point

Accepted Answer

A)   Q2.
B)   Q3.
C)   Q4.
D)   Q5.E) A) and B)
F) B) and C)

Question 8

In the absence of externalities,the "invisible hand" leads a market to maximize

Accepted Answer

A)   producer profit from that market.
B)   total benefit to society from that market.
C)   both equality and efficiency in that market.
D)   output of goods or services in that market.E) A) and D)
F) B) and C)

Question 9

John lives in an apartment building and gets a $700 benefit from playing his stereo.Mary,who lives next door to John and often loses sleep due to the music coming from John's stereo,bears a $1,000 cost from the noise.At which of the following offers from Mary could both Mary and John benefit from the silencing of John's stereo?

Accepted Answer

A)   $200
B)   $600
C)   $900
D)   $1,100E) A) and B)
F) A) and C)

Question 10

An externality arises when a person engages in an activity that influences the well-being of

Accepted Answer

A)   buyers in the market for that activity and yet neither pays nor receives any compensation for that effect.
B)   sellers in the market for that activity and yet neither pays nor receives any compensation for that effect.
C)   bystanders in the market for that activity and yet neither pays nor receives any compensation for that effect.
D)   Both (a) and (b) are correct.E) B) and C)
F) A) and C)

Question 11

Figure 10-3 
-Refer to Figure 10-3.The social cost curve is above the supply curve because

Accepted Answer

A)   it takes into account the external costs imposed on society by the concert.
B)   it takes into account the effect of local noise restrictions on concerts in parks surrounded by residential neighborhoods.
C)   concert tickets are likely to cost more than the concert actually costs the organizers.
D)   residents in the surrounding neighborhoods get to listen to the concert for free.E) A) and B)
F) All of the above

Question 12

Suppose that meat producers create a negative externality.What is the relationship between the equilibrium quantity and the socially optimal quantity of meat to be produced?

Accepted Answer

A)   They are equal.
B)   The equilibrium quantity is greater than the socially optimal quantity.
C)   The equilibrium quantity is less than the socially optimal quantity.
D)   There is not enough information to answer the question.E) A) and C)
F) B) and C)

Question 13

Table 10-4
 
-Refer to Table 10-4.The market equilibrium quantity of output is

Accepted Answer

A)   3 units.
B)   4 units.
C)   5 units.
D)   6 units.E) A) and B)
F) A) and C)

Question 14

University researchers create a positive externality because what they discover in their research labs can easily be learned by others who haven't contributed to the research costs.If there are no subsidies,what is the relationship between the equilibrium quantity of university research and the optimal quantity of university research produced?

Accepted Answer

A)   They are equal.
B)   The equilibrium quantity is greater than the socially optimal quantity.
C)   The equilibrium quantity is less than the socially optimal quantity.
D)   There is not enough information to answer the question.E) A) and B)
F) A) and C)

Question 15

Figure 10-4 4,then total economic well-being would be maximized if output A)  decreased to Q1. B)  decreased to Q2. C)  decreased to Q3. D)  stayed at Q4." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-4.If this market is currently producing at Q4,then total economic well-being would be maximized if output

Accepted Answer

A)   decreased to Q1.
B)   decreased to Q2.
C)   decreased to Q3.
D)   stayed at Q4.E) All of the above
F) A) and B)

Question 16

An externality is an example of

Accepted Answer

A)   a corrective tax.
B)   a tradable pollution permit.
C)   a market failure.
D)   Both a and b are correct.E) B) and C)
F) B) and D)

Question 17

Negative externalities occur when one person's actions

Accepted Answer

A)   cause another person to lose money in a stock market transaction.
B)   cause his or her employer to lose business.
C)   reveal his or her preference for foreign-produced goods.
D)   adversely affect the well-being of a bystander who is not a party to the action.E) A) and C)
F) A) and B)

Question 18

Scenario 10-3
Suppose the equation for the demand curve in a market is  ,where  is the quantity demanded and  is the price.Also,suppose the equation for the supply curve in the same market is  ,where  is the quantity supplied.
-Refer to Scenario 10-3.Suppose there is an external cost of $12 associated with the production of each unit of the good.What particular tax or subsidy would move the market to the social optimum?

Accepted Answer

A tax of $12 per uni...

Question 19

Figure 10-2.The graph depicts the market for plastic. 
-Refer to Figure 10-2.Suppose that the production of plastic creates a social cost which is depicted in the graph above.Without any government regulation,what price will the firm charge per unit of plastic?

Accepted Answer

A)   $3
B)   $3.50
C)   $5
D)   $8E) All of the above
F) A) and D)

Question 20

The externality associated with technology spillovers

Accepted Answer

A)   cannot be internalized by government.
B)   is a negative externality.
C)   can be internalized,potentially,through taxation of firms that are responsible for technology spillovers.
D)   can be internalized,potentially,through patent protection.E) None of the above
F) A) and C)

Exam 10: Externalities

The externality associated with technology spillovers

Correct Answer
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Correct Answer
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Suppose that an MBA degree creates no externality because the benefits of an MBA are internalized by the student in the form of higher wages.If there are no government subsidies for MBAs,then which of the following statements is correct?

Correct Answer
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Correct Answer
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An externality is an example of

Correct Answer
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Figure 10-3 -Refer to Figure 10-3.The social cost curve is above the supply curve because

Correct Answer
verified

Emission controls on automobiles are an example of a

Correct Answer
verified

An externality arises when a person engages in an activity that influences the well-being of

Correct Answer
verified

Some policies toward externalities provide incentives so that private decision makers will choose to solve the problem on their own.What name do we use for these types of policies?

Correct Answer
verified
We call th...
View Answer

According to the Coase theorem,whatever the initial distribution of rights,the interested parties can bargain to an efficient outcome.

Correct Answer
verified

Correct Answer
verified
A tax of $12 per uni...
View Answer

Figure 10-2.The graph depicts the market for plastic. -Refer to Figure 10-2.Suppose that the production of plastic creates a social cost which is depicted in the graph above.Without any government regulation,what price will the firm charge per unit of plastic?

Correct Answer
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Figure 10-4 -Refer to Figure 10-4.If this market is currently producing at Q₄,then total economic well-being would be maximized if output

Correct Answer
verified

Negative externalities occur when one person's actions

Correct Answer
verified

In some cases,tradable pollution permits may be better than a corrective tax because

Correct Answer
verified

Suppose that meat producers create a negative externality.What is the relationship between the equilibrium quantity and the socially optimal quantity of meat to be produced?

Correct Answer
verified

In the absence of externalities,the "invisible hand" leads a market to maximize

Correct Answer
verified

Table 10-4 -Refer to Table 10-4.The market equilibrium quantity of output is

Correct Answer
verified

Corrective taxes are more efficient than regulations for keeping the environment clean.

Correct Answer
verified

Figure 10-9 -Refer to Figure 10-9,Panel (b) and Panel (c) .The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack.Therefore,the socially optimal quantity of smokestack scrubbers is represented by point

Correct Answer
verified

Exam 10: Externalities

The externality associated with technology spillovers

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose that an MBA degree creates no externality because the benefits of an MBA are internalized by the student in the form of higher wages.If there are no government subsidies for MBAs,then which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An externality is an example of

Correct AnswerverifiedShow Answer

Figure 10-3 -Refer to Figure 10-3.The social cost curve is above the supply curve because

Correct AnswerverifiedShow Answer

Emission controls on automobiles are an example of a

Correct AnswerverifiedShow Answer

An externality arises when a person engages in an activity that influences the well-being of

Correct AnswerverifiedShow Answer

Some policies toward externalities provide incentives so that private decision makers will choose to solve the problem on their own.What name do we use for these types of policies?

Correct AnswerverifiedWe call th...View AnswerShow Answer

According to the Coase theorem,whatever the initial distribution of rights,the interested parties can bargain to an efficient outcome.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA tax of $12 per uni...View AnswerShow Answer

Figure 10-2.The graph depicts the market for plastic. -Refer to Figure 10-2.Suppose that the production of plastic creates a social cost which is depicted in the graph above.Without any government regulation,what price will the firm charge per unit of plastic?

Correct AnswerverifiedShow Answer

Figure 10-4 -Refer to Figure 10-4.If this market is currently producing at Q4,then total economic well-being would be maximized if output

Correct AnswerverifiedShow Answer

Negative externalities occur when one person's actions

Correct AnswerverifiedShow Answer

In some cases,tradable pollution permits may be better than a corrective tax because

Correct AnswerverifiedShow Answer

Suppose that meat producers create a negative externality.What is the relationship between the equilibrium quantity and the socially optimal quantity of meat to be produced?

Correct AnswerverifiedShow Answer

In the absence of externalities,the "invisible hand" leads a market to maximize

Correct AnswerverifiedShow Answer

Table 10-4 -Refer to Table 10-4.The market equilibrium quantity of output is

Correct AnswerverifiedShow Answer

Corrective taxes are more efficient than regulations for keeping the environment clean.

Correct AnswerverifiedShow Answer

Figure 10-9 -Refer to Figure 10-9,Panel (b) and Panel (c) .The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack.Therefore,the socially optimal quantity of smokestack scrubbers is represented by point

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified
We call th...
View Answer

Correct Answer
verified

Correct Answer
verified
A tax of $12 per uni...
View Answer

Correct Answer
verified

Figure 10-4 -Refer to Figure 10-4.If this market is currently producing at Q₄,then total economic well-being would be maximized if output

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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